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A law blog by Robert Lombardo on The Whole 9

Attorney Robert Lombardo came from the creative world and then began practicing law in 1995. The diversity of his professional life (years of which were spent in Europe, Australia and Japan) gives him a unique perspective on the law. Currently Robert is focusing on entertainment law (which encompasses nearly all creative industries) and brings this firsthand experience and desire to make the law accessible to the The Whole 9 community.

A Corporation Exists Solely to Make Money for the Owners?

“So the question is do corporate executives, provided they stay within the law, have responsibilities in their business activities other than to make as much money for their stockholders as possible? And my answer to that is, no, they do not.”  - Economist Milton Friedman

 

This post is in response to the question posed by Arthur Kegerreis in his blog post Censorship, Ann Magnuson, Lisa Douglass, David DePalo and the KGB, in which he asks: “when corporate interests dictate the rules for a society, online or not, [are] the community’s best interests . . . ultimately . . . served?”

 

Although the concept of incorporation has been around since the Roman Empire and the oldest commercial corporation was supposedly chartered in Sweden in 1347, the British East India Company sets today’s precedence for corporations.

This corporation (or invention of the British Crown through the creation of Queen Elizabeth I in 1600) allowed the British to exploit their colonies while freeing the owners of the enterprise, for the first time, from the responsibility for their abhorrent behavior.  In short, the British East India Company allowed the British Crown to rape India without any of the Christian guilt.  (Get exceedingly rich being brutal and exploitive – sound good?)

The U.S. founding fathers recognized this danger and believed corporate charters should be granted only to those entities willing to serve the greater public interest.  Early on, states would restrict a corporation to one type of business and strictly limited the amount of capital it could amass.  The states also required stockholders to be local residents, detailed specific benefits that were due the community, and placed a limit on the life of a corporation’s charter.  States would withdraw a corporation’s charter if it deviated from its stated mission or acted in a manner inconsistent with its charter.

Eventually, the restrictions imposed to protect the public were eroded away.

The major change came in 1886, when the U.S. Supreme Court ruled that a corporation has the right of “personhood” under the 14th Amendment (originally intended to protect the rights of freed slaves) and, as such, enjoys the same constitutional protections as all of us.

The corporation had, thus, become a super person– legally entitled to all civil rights without any civil responsibilities.

The corporation is a “legal fiction” that allows the investors (who own the business) to avoid personal responsibility for business dealings that are unethical (or illegal) even though that unprincipled conduct profits them enormously.  That is the antithesis of the community’s “best interests.”

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